Retail is India's largest industry. It accounts for over 10 per cent of the India's GDP and around eight per cent of the employment. Retail sector is one of India's fastest growing sectors with a 5 per cent compounded annual growth rate. India's huge middle class base and its untapped retail industry are key attractions for global retail giants planning to enter newer markets. Driven by changing lifestyles, strong income growth and favorable demographic patterns, Indian retail is expected to grow 25 per cent annually. It is expected that retail in India could be worth US$ 175-200 billion by 2016.
The organized retail industry in India had not evolved till the early
1990s. Until then, the industry was dominated by the un-organized
sector. It was a sellers market, with a limited number of brands, and
little choice available to customers. Lack of trained manpower, tax laws
and government regulations all discouraged the growth of organized
retailing in India during that period. Lack of consumer awareness and
restrictions over entry of foreign players into the sector also
contributed to the delay in the growth of organized retailing.
Foundation for organized retail in India was laid by Kishore Biyani of
Pantaloon Retails India Limited (PRIL). Following Pantaloon's successful
venture a host of Indian business giants such as Reliance, Bharti, Birla
and others are now entering into retail sector.
A number of factors are driving India's retail market. These include:
increase in the young working population, hefty pay-packets, nuclear
families in urban areas, increasing working-women population, increase
in disposable income and customer aspiration, increase in expenditure
for luxury items, and low share of organized retailing. India's retail
boom is manifested in sprawling shopping centers, multiplex- malls and
huge complexes that offer shopping, entertainment and food all under one
But there is a flip side to the boom in the retail sector. It is feared
that the entry of global business giants into organized retail would
make redundant the neighbourhood kiryana stores resulting in dislocation
in traditional economic structure. Also, the growth path for organized
retail in India is not hurdle free. The taxation system still favours
small retail business. With the intrinsic complexities of retailing such
as rapid price changes, constant threat of product obsolescence and low
margins there is always a threat that the venture may turn out to be a
loss making one.
A perfect business model for retail is still in evolutionary stage.
Procurement is very vital cog in the retail wheel. The retailer has to
fight issues like fragmented sourcing, unpredictable availability,
unsorted food provisions and daily fluctuating prices as against
consumer expectations of round-the-year steady prices, sorted and
cleaned food and fresh stock at all times.
Trained human resource for retail is another big challenge. The talent
base is limited and with the entry of big giants there is a cat fight
among them to retain this talent. This has resulted in big salary hikes
at the level of upper and middle management and thereby eroding the
profit margin of the business. All the companies have laid out ambitious
expansion plans for themselves and they may be hampered due lack of
requisite skilled manpower.
But retail offers tremendous for the growth of Indian economy. If all
the above challenges are tackled prudently there is a great potential
that retail may offer employment opportunities to millions living in
small town and cities and in the process distributing the benefits of
economic boom and resulting in equitable growth.
Note: The above information was last updated on 21-07-2007